Buzz
Once you’ve settled your student loan, you can’t help but feel ecstatic about making that final payment. The freedom from the loan’s weight makes you so overjoyed that you might even throw a celebration, plan the trip you've been dreaming of, and, naturally, get rid of all the paperwork from your loan servicer to shake off any lingering negative vibes.
However, before you toss any documents, make sure you've truly settled every penny of the debt.
Student Loan Hero shares the story of Americ McCullagh, a borrower who thought her $40,000 loan was fully paid off, only for it to resurface and cause trouble a decade later:
"I got rid of most or all my (files) about my student loans," said McCullagh, who spent six years earning her occupational therapy degree. She recalled thinking, "Why would I need it? It’s over."
Eleven years later, McCullagh started receiving notices from her lender regarding unpaid dues. Initially, she discarded these Sallie Mae envelopes without much concern. But as the pile grew, she decided to open one, only to be met with an unwelcome surprise.
Sallie Mae stated that she had paid off her debt, except for around $150. After more than ten years of accumulated and capitalized interest, the remaining balance had swelled to nearly $12,000.
After spending eight hours on the phone with Sallie Mae, McCullagh learned that the debt was not fully paid because of the timing of her last payment. "Her bank settled the loan a few days after Sallie Mae had added the $150 in interest," reports Student Loan Hero. Over the next 11 years, that $150 ballooned into $12,000.
What to Do If You Get an Unexpected Bill
One key takeaway from McCullagh’s experience is that she ignored the letters and notices from Sallie Mae. It's essential to open all your mail, especially communications from financial institutions.
However, there are other ways to verify your balance before an inflated bill catches you off guard. For federal loans, you can check your balance using the National Student Loan Data System (NSLDS). This is also helpful in case you’re concerned about potential scams: the NSLDS lists your servicer, so you can cross-check it with the company sending you bills, as recommended by Student Loan Hero. Additionally, after paying off a loan, set a reminder on your Google Calendar a few weeks or a month later. It takes only a few minutes but ensures that no hidden interest or fees have been added.
For private loans, you’ll need to contact your servicer. While it’s a hassle, it could save you $12,000. Another option is to check your credit report for any remaining loans.
If you receive a letter stating you still owe money after you've settled the debt, Student Loan Hero suggests responding to the sender:
The best course of action is to send a debt validation letter.
The Consumer Financial Protection Bureau offers a template for this exact situation.
In the letter, request a complete history of the loan, along with a written explanation for the balance still due. Be sure to keep the communication in writing to maintain a formal record.
Once you've paid off your debt, make sure to request a payoff balance statement from your servicer. This provides you with written confirmation that you are officially free of the loan.
